Soldier Dies in Rescue Effort, Clouding Israelis' Joy at Nobel : Mideast: The kidnaped 19-year-old is killed by his Islamic militant captors as Israeli army unit storms a West Bank house. Second soldier, 3 Palestinians also die in the raid.

JERUSALEM — The Israeli soldier whose kidnaping by Islamic militants threatened to derail the Israeli-Palestinian peace process was killed Friday night in a firefight when Israeli soldiers stormed the West Bank house where he was held.

The disastrous climax to a hostage drama that has absorbed Israelis since Tuesday night overshadowed the nation's joy at the announcement Friday morning in Norway that Israeli Prime Minister Yitzhak Rabin and Foreign Minister Shimon Peres received this year's Nobel Peace Prize, along with Palestine Liberation Organization Chairman Yasser Arafat.

In a hastily called late-night news conference Friday, a grim-faced Rabin told the nation that the soldier, 19-year-old Nachshon Waxman, was killed "in cold blood" by his captors during the operation.

"I, as minister of defense and prime minister, take full responsibility," Rabin said. "It is our obligation not to surrender to terrorism but to act against it."

Arafat aide Marwan Kanafani said the PLO chairman was saddened by the loss of life. Kanafani said the PLO had been vindicated in its assertion that Waxman was not being held in Gaza.

Another Israeli, an officer identified at the scene as Capt. Nir Poraz, was killed during the attack. Nine other Israelis were wounded and three Palestinians were killed, Chief of Staff Lt. Gen. Ehud Barak said. Two Palestinians were arrested.

Barak said that Waxman, whose hands and feet were tied, was shot in the neck and chest by his captors shortly after the assault on the house in the village of Bir Nabala began. Bir Nabala lies just outside Jerusalem's northern municipal boundary, only two miles from the home of Waxman's parents.

The elite unit mounted the attack only 90 minutes before the 9 p.m. (11 a.m. PDT) deadline set by the militant group Hamas for killing Waxman if Israel refused to release Palestinian prisoners in its custody. The commandos were slowed by having to use explosives to force their way into the house, Barak said.

Once inside, they had to use explosives again to destroy the door to the room where Waxman was held, Barak said.

"They could hear the terrorists in the room with Waxman shouting, 'The soldier is already dead,' " Barak said. "They shouted at the terrorists to surrender, but they said they preferred to die."

It was a stunning turn of events at the end of a day during which most Israelis anxiously awaited the Hamas deadline.

Throughout the week, Israelis have listened to the tearful pleas of Waxman's mother, Esther, broadcast on Israel Army Radio and Israel Television, for the release of her son, who holds dual American-Israeli citizenship. The soldier's plight triggered a massive outpouring of support for the family.

Tens of thousands of Israelis responded to a request from the family Thursday night and flocked to the Western Wall in Jerusalem's Old City--a site holy to Jews as the only remnant of the Temple of Solomon, the destruction of which marked the start of the Diaspora--to pray for Waxman's safe return.

Hundreds gathered outside the family home in a northern Jerusalem suburb Friday night as the deadline approached and then passed.

So caught up in the drama was most of the nation that Rabin violated religious prohibitions against working on the Sabbath in order to hold the press conference, broadcast live on Israel Television, and explain how Waxman died.

The somber turn of events was particularly confusing, because just three hours before the army acknowledged that Waxman died in the failed rescue attempt, a Hamas leader announced that the organization had negotiated with Israel a 24-hour extension of its deadline for killing Waxman.

Mahmoud Zahar told Israel Television at 8 p.m. that "the deadline has been extended."

Zahar said that the militants holding Waxman, for whom he said he was acting as a mediator, had agreed to extend their deadline after Israel agreed to free Sheik Ahmed Yassin, Hamas' founder and spiritual leader, and 32 Palestinian women it is holding among about 4,000 Palestinian prisoners.

Rabin confirmed that he had received the support of both his Cabinet and opposition parties for negotiating with Hamas. He used an Israeli Arab member of the Knesset, Israel's Parliament, as a go-between.

"There was hope, but Rabin killed the hope and the soldier," said the go-between, Talab Sanaa, after Waxman's death was announced. "There were chances to bring out the soldier alive."

The Izzidin al-Qassam military unit of Hamas, which claimed responsibility for abducting Waxman on Sunday, had said on Tuesday night that it would kill him Friday night unless Israel released Yassin and 200 other prisoners.

Zahar said an appeal broadcast by Israel Television on Thursday night from the jailed Yassin--the second he had made--to Waxman's captors, asking that they not harm the soldier, persuaded the kidnapers to modify their demands and extend the deadline.

But Rabin said Friday night that Hamas waited too long to make it clear to him that it was willing to extend the deadline.